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Nigeria Eyes Historic LNG Supply Deal with South Africa Amidst Energy Shifts

Published December 29, 2023
7 months ago

In a historic turn of events for both Nigerian and South African energy landscapes, Nigeria’s reputable Riverside LNG has declared that it's on the brink of sealing its first gas supply transaction with South Africa. This pivotal agreement is seen as a potential breakthrough amidst South Africa's desperate attempt to tackle chronic power outages and diversify its energy mix away from its coal-dependent grid.

The CEO of Riverside LNG, David Ige, who has previously served as an executive at Nigeria National Petroleum Corp, revealed in a press interview that discussions are ongoing to finalize an off-take agreement for South Africa, with the deal likely to be concluded soon. Showing considerable reticence due to non-disclosure agreements, Ige did not furnish additional specifics on the negotiations, underscoring the confidential nature of the current talks.

Nigeria is now looking to expand its footprints across the continent. The country boasts the largest gas reserves on the African continent and has been proactive in establishing export relations, having previously signed an agreement with Johannes Schuetze Energy Import AG of Germany. Its ambition does not end at South African borders as the company is also actively exploring opportunities in other African nations such as Liberia and Cameroon.

The deal, if closed, will not start yielding immediate fruits as the company stated that gas deliveries to South Africa are projected to commence in 2027. This gives South Africa a generous timeline to enhance or erect new import terminal infrastructure capable of handling liquefied natural gas (LNG).

South Africa’s archaic and failing power stations are everyday headlines, plagued by mismanagement and operational inefficiencies within the state-run power utility, Eskom. Ongoing blackouts demonstrate the energy crisis gripping the nation as existing facilities stumble to meet the country’s power demand. Moreover, the push to integrate more private electricity producers is currently stagnated by grid limitations and extensive legal challenges.

Nonetheless, there’s a silver lining in the energy cloud. The country is pivoting towards a more sustainable energy approach, seeking to harness renewable energy to cater for up to 60 gigawatts of its energy requirements by 2030. This marks a vital transition from its traditional coal-based backbone, which currently furnishes four-fifths of its power generation.

In line with the global trends towards cleaner energy, a report by BloombergNEF and Bloomberg Philanthropies suggests that augmenting renewable sources like solar and wind with battery storage and flexible gas-fired plants remains the most cost-effective strategy for ensuring a reliable power supply.

Moreover, the 16-member Southern African Development Community (SADC) has ratified a colossal $17 billion strategy to construct natural gas infrastructure within the region, comprising investments in pipelines, terminals, and other necessary apparatus for managing local and imported gas supplies.

Reflecting upon the strategic benefits of the proposed gas supply deal, Ige noted the expanding gas market surrounding Nigeria. He expressed confidence that Nigeria is well-positioned to rise as a pivotal trading nexus for gas, particularly given its vast reserves and close proximity to potential market areas within the 3,000 nautical miles radius, including Southern and Western Africa, Northwestern Europe, and extending to the Caribbean and South America.

Amidst the complex blend of optimism and caution that marks any significant energy transition, Nigeria and South Africa's pending gas supply deal could represent a transformative step towards resolving South Africa's energy challenges, fostering economic stability, and contributing to a lower carbon future for the region.

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